2015 Medicare ACO Results Reflect the Turning of the Deming Wheel

Quality expert W. Edwards Deming was famous for many concepts, including the Deming Wheel or Deming Cycle, more formally known as the PDSA (Plan-Do-Study-Act) Cycle. It is a systematic series of steps for gaining valuable learning and knowledge for the continual improvement of a product or process.

The Centers for Medicare and Medicaid Services’ August 25 release of 2015 quality and financial performance results for Medicare accountable care organizations (ACOs) reflected the application of the PDSA Cycle by the participating organizations as well as CMS in its continued development and refining of its ACO programs.

At a high level, in 2015, the 404 reporting ACOs—392 in the Medicare Shared Savings Program (MSSP) and 12 in the Pioneer ACO Model—achieved $466 million in savings. A bit more than half of the ACOs (210 or 52 percent) held costs below their benchmark, and slightly less than a third (125 or 31 percent) generated savings above a minimum savings rate (MSR) and met quality performance standards, thus meriting shared savings.

As is common with most statistics and especially any material news coming out of Washington, D.C. nowadays, there were widely divergent interpretations of these results.

In contrast, Clif Gaus, CEO of the National Association of ACOs, in an email message to FierceHealthcare, struck a negative tone in his appraisal of the results, sharing that his organization “was disappointed not to find stronger financial results that reflect the extensive financial and personal contributions invested by ACOs” and he also said that CMS and Congress must “take swift and decisive action to solidify the foundation of the Medicare ACO program.”

Despite these obviously divergent views, certainly neither Conway nor Gaus would disagree with the idea that the ability to learn is a critical success factor in ACO performance.

A deeper analysis of the data bears this out. As noted by CMS, more-experienced ACOs were more likely to generate savings above their MSR. In performance year 2015, 42 percent of ACOs that started in 2012 generated savings above their MSR. This compares with 37 percent for ACOs starting in 2013, 22 percent for 2014 starters, and 21 percent for 2015 starters.

The value of learning from experience was also reflected in the quality results. MSSP ACOs that reported quality measures in both 2014 and 2015 improved on 84 percent of the measures common to both years.

Thus, ACOs with more experience in these programs tend to perform better over time. This was observed, albeit in a much smaller sample, in the Physician Group Practice (PGP) Demonstration, the precursor to today’s Medicare ACO programs. During the demonstration, conducted from 2005 to 2010, the physician groups’ overall performance on quality and cost efficiency measures improved each year of the demonstration, with generally increasing performance payments: $7.3 million in year one, $13.8 million in year two, $25.3 million in year three, $31.7 million in year four, and $29.4 million in year five. The PGPs performed better over time and were rewarded financially.

CMS itself has been applying the PDSA Cycle in its execution of Sections 3021 and 3022 of the Affordable Care Act, with its various innovation investments and ACO programs, including the Medicare Shared Savings Program, the Pioneer ACO Model, the ACO Investment Model, the Advance Payment ACO Model, the Comprehensive ESRD Care Initiative, and the Next Generation ACO Model. Some of these programs have not proven to be very popular with healthcare provider organizations, and some, notably the Pioneer ACO Model, have dwindling numbers of participants. Yet all of them are providing valuable learning and knowledge for continued refinement of the ACO concept in support of the unyielding and broader fee-for-value movement.